CEZ Agrees to 50-Year Coal Supply Accord, Chvaletice Plant Sale

March 19 (Bloomberg) -- CEZ AS, the largest Czech producer
of electricity, signed a 50-year contract with Czech Coal AS to
fuel its Pocerady power station, ending a dispute that had
threatened to disrupt supplies to the plant.

CEZ will start paying 38.8 koruna ($2) a gigajoule, rising
step-by-step through 2023 when the price should be 65 percent of
the benchmark rate for black coal, the company said. Czech Coal
will supply CEZ with 5 million metric tons of the fuel a year,
down from 8.5 million tons now, the utility said in a statement.
CEZ separately agreed to sell its Chvaletice power station.

Coal supplies to Pocerady were threatened by a dispute
between the two sides over prices paid for the fuel after CEZ’s
long-term supply contract ran out last year. Czech Coal had
sought to double the price from 33 koruna a gigajoule.

The deal, which may add as much as 2 billion koruna to CEZ
operating profit this year, gives Czech Coal the option to buy
Pocerady, next to its Vrsany mine, in 2016 or 2024, the utility
said. CEZ will invest “tens of billions koruna” at the site.

“This opens up the opportunity for sizable investments
into both the Pocerady plant and the Vrsany mine,” Benes said.

CEZ also agreed to sell its Chvaletice coal-fired station
to Litvinovska Uhelna AS for 4.12 billion koruna and an annual
payment amounting to 90 percent of the market value of carbon
credits allocated to the station, currently about 450 million
koruna. The payment compensates CEZ for modernizing the site.

The sale, spurred by a European Commission probe into the
possibility CEZ’s control over the network threatened to deter
rivals from entering the market, needs European Union approval.